Priceline Group Inc (NASDAQ:PCLN) has offered $2.6 billion ($103 per share) in cash to buy restaurant booking company OpenTable Inc (NASDAQ:OPEN), paying a 46% premium over yesterday’s closing price of $70, reports Drew Fitzgerald for The Wall Street Journal. Shares of OpenTable made up the difference in pre-market trading while Priceline gained 1%. Like most other internet stocks, Priceline outperformed the market during 2013 but lost ground between the end of February and the middle of May, now returning to its mid-February level.

Priceline Group

OpenTable a natural fit for Priceline’s range of booking services

“The kind of work that we do day-to-day is very similar,” said Priceline CEO Darren Huston. “It’s just a different marketplace.”

Priceline Group has been buying growth for years, having previously acquired Booking.com and Kayak.com, so the decision to buy OpenTable isn’t surprising. OpenTable has a trailing twelve month PE of 50x (compared to a TTM PE of 32x for Priceline) so the growth doesn’t come cheap, but Huston pointed to OpenTable’s relationship with 31,000 restaurants and the capacity to continue growing to justify the deal. OpenTable’s PE multiple is nearly three times higher than the rest of the SPX, while Priceline’s is close to double.

Buying growth can often destroy shareholder value in the long run, but OpenTable does seem like a natural fit to be incorporated into Priceline Group’s existing suite of online booking services. It’s already normal for airfare reservation sites to offer car rental and hotel bookings either as addons or package deals, so throwing restaurant reservations into the mix gives a well-rounded service for business travelers on top of the regular business that OpenTable is already doing. Besides, the kind of investor who wants to own Priceline (expensive, high growth) is probably happy to own OpenTable as well, as pre-market trading shows.

Priceline using its positive cash flow to fuel more growth

Priceline Group was singled out by Goldman Sachs analyst Heath T. Perry as a Buy-rated internet stock worth watching because it combined the high growth that you expect from the sector with strong free cash flow. It will be interesting to know if he would still recommend it as highly now that it has decided to plow some of that cash back into growth with the OpenTable acquisition.